Review of fiscal 2025

In fiscal 2025, the established growth trajectory continued successfully despite a challenging global business environment. We were able to organically increase both our sales and our EBITDA pre, the most important key performance indicator for managing our operational business.

In the Life Science business sector, we further strengthened our position as a leading provider for customers in research, diagnostics and pharmaceuticals. Fiscal 2025 was characterized by organic sales growth and strong order intake. The successful opening of a new facility in Blarney, Ireland, enhanced our strategic positioning.

In Healthcare, we achieved moderate organic sales growth based on all franchises. In addition to the successful completion of the acquisition of SpringWorks Therapeutics, Inc., USA, on July 1, 2025, we set an important milestone for future growth with the opening of the new Launch and Technology Center at our site in Darmstadt.

The net sales of the Electronics business sector remained organically stable in fiscal 2025. In the Semiconductor Solutions business unit, we recorded increased demand for modern microchips in the field of artificial intelligence, as well as for mature microchips. As part of the strategic capacity expansion, we opened a new site in Kaohsiung, Taiwan, which enables us to strengthen the resilience of the global semiconductor supply chain. Additionally, as part of the portfolio optimization, the divestment of the Surface Solutions business unit was completed on July 31, 2025.

Sustainability is an integral part of our business strategy. In fiscal 2025, we revised parts of our sustainability strategy and sharpened our commitment to deliver more sustainable solutions through our portfolio. We also achieved key milestones in our sustainability strategy by reducing our greenhouse gas emissions (Scope 1 and 2) by more than half compared to 2020 through effective and consistent measures and thereby achieved our 2030 target ahead of schedule. Furthermore, we finalized our first Climate Transition Plan. To further advance our long-term sustainability goals, we have again implemented relevant indicators and targets in the Sustainability Factor within the Long-Term Incentive Plan (LTIP) 2025.

Fiscal 2025 showed a differentiated performance regarding compensation: based on stable results in fiscal years 2023 to 2025 the payouts from the profit sharing reflect a consistent operational performance. In contrast, the payout from the Long-Term Incentive Plan (LTIP) was significantly lower, as the multi-year targets for the key performance indicators set at the inception of the plan were not met to the required extent. In particular, the development of the share price during the performance period fell short of expectations. A detailed presentation of the target achievement and the resulting compensation components will be provided in the following sections.

In addition, there were the following changes within the Executive Board in fiscal 2025: Khadija Ben Hammada was appointed Chief People Officer and is a member of the Executive Board in this newly created position with effect from March 1, 2025. Furthermore, Jean-Charles Wirth took over the position of CEO Life Science from Matthias Heinzel on June 1, 2025. Likewise, the role of CEO Healthcare was transferred from Peter Guenter to Dan Pinhas Bar Zohar on June 1, 2025. All had previously been employed in leading positions within the company. Matthias Heinzel and Peter Guenter left the Executive Board on May 31, 2025. In addition to his role as CEO Electronics, Kai Beckmann became Deputy Chair of the Executive Board effective September 25, 2025.

In fiscal 2025, the contractually agreed compensation of the other members of the Executive Board remained unchanged.

In the Supervisory Board, there was one change of mandate. Effective June 30, 2025, Sascha Held left the Supervisory Board and as of July 1, 2025, and Sven Vollrath joined. Anne Lange became Vice Chair of the Supervisory Board on July 1, 2025.

Approval of the Compensation Report 2024

In accordance with section 120a (4) AktG, the Compensation Report 2024 was approved with a voting result of 88.28% at the Annual General Meeting 2025. Only shareholders of Merck KGaA, Darmstadt, Germany, are entitled to vote at the Annual General Meeting (and thus not E. Merck KG, Darmstadt, Germany, in its capacity as personally liable partner of Merck KGaA, Darmstadt, Germany).

During the Annual General Meeting 2025, and in numerous discussions before and after the Annual General Meeting, the Group received feedback from investors, shareholder associations and proxy advisors on the compensation of the Executive Board, as well as the presentation in the Compensation Report. We consider this feedback to be valuable input for the continuous improvement of the Compensation Report and decisive for the revision of the compensation system. The revised compensation system, which was approved by 88.77% at the Annual General Meeting 2025, will enter into force on January 1, 2026.

In the discussions, we were given the impression that the high level of transparency in our compensation reporting was positively acknowledged. However, some investors noted that while the total amount of the maximum compensation is disclosed in the description of the Executive Board compensation system according to section 87a paragraph 1 of the German Stock Corporation Act (AktG), the individual capped amounts were not disclosed for all compensation components. These, as in previous years, are disclosed in the compensation report.

Regarding the design of the compensation system, the discussion partners appreciated the strengthening of the “pay for performance” principle in the design of the performance-related variable compensation components for the Executive Board. In particular, the revision of the profit sharing was highlighted. By focusing the performance period on the respective fiscal year and by doubling the threshold value required for a payout, the incentive effect and performance orientation of the profit sharing are further strengthened.

With regard to the compensation structure, it was commented that the Executive Board’s compensation system will in future be even more strongly connected to the long-term and sustainable success of the company. This is achieved by a proportionately higher weighting of the Long-Term Incentive Plan within the variable compensation, while maintaining the maximum amount of compensation.

Additionally, in relation to the design of the profit sharing, it was discussed whether the profit after tax of the E. Merck KG, Darmstadt, Germany, as the sole financial performance metric can adequately reflect the performance of the Executive Board members holistically. Unlike the management board members of a German stock corporation (“Aktiengesellschaft” or “AG”), the members of the Executive Board are personally liable partners which is reflected in a strongly entrepreneurial-oriented compensation via the profit sharing. The participation in the profit of E. Merck KG, Darmstadt, Germany, thus directly aligns the compensation of the Executive Board members with the success or with the failure of the company. Furthermore, the Personnel Committee considers the individual performances of the Executive Board members and their contributions to our sustainability goals within the adjustment factor of the profit sharing. This ensures – along with the other elements of the compensation system – a holistic alignment of the compensation of our Executive Board members with the company’s success and the interests of our investors.

Regarding the future design of the Long-Term Incentive, the even more explicit consideration of sustainability aspects in the compensation system was discussed. In the compensation system valid from fiscal 2026, strategically derived sustainability goals will be implemented alongside the financial KPIs as independent and additive key indicators in the LTIP rather than as a sustainability factor (as before). This means that sustainability goals and financial KPIs will be of equal significance. With some discussion partners, the target achievement curve for the relative performance of the share of Merck KGaA, Darmstadt, Germany, compared to the DAX^® was discussed. In our view, the DAX^® Total Return Index represents a suitable and ambitious peer group of globally operating companies from various sectors that consistently set high standards in long-term performance. To keep pace with the DAX^® Total Return Index, outstanding results must be continuously achieved, regardless of industry-specific or macroeconomic fluctuations. Accordingly, we consider the design of the target achievement curve for the relative share price performance to be ambitious and to establish the intended “pay for performance” principle within the Executive Board’s compensation system. Against this background, it is important to note that the performance of the share of Merck KGaA, Darmstadt, Germany, is measured against a so-called Total Return Index. This means that dividend payments are included in the performance of our peer companies, while they are in contrast not considered in the calculationof the share performance of Merck KGaA, Darmstadt, Germany.

In summary, it can be stated that the constructive exchange with our investors plays an essential role in the continuous development of our compensation system and the improvement of reporting. In the run-up to the 2026 Annual General Meeting, we will continue the dialogue with investors in order to obtain constructive and valuable feedback and report accordingly in the following year.

Compensation for fiscal 2025 – summary

Compensation for services up to December 31, 2025 – Chair of the Executive Board (Infographic)

The average calculation of the compensation of further members of the Executive Board is not shown for fiscal 2025. Due to entries into and exits from the Executive Board, the average calculation of the compensation is not meaningful.

Terms of the compensation components for fiscal 2025 (Infographic)

Relevant key performance indicators for profit sharing and LTIP

Profit after tax of E. Merck KG, Darmstadt, Germany (Bar chart)

Performance of share of Merck KGaA, Darmstadt, Germany

Review of fiscal 2025